UAE – Onshore Courts
The national Courts of the UAE operate within the civil law system and are subject to the national/federal laws of the UAE. These Courts, often referred to as “onshore” Courts, are distinct from the Courts in the two financial freezones: the DIFC Courts in Dubai and the ADGM Courts in Abu Dhabi. These financial freezones have their own legal system and jurisdiction, distinct from onshore Courts.
Whilst UAE procedural law does not provide for or recognise “freezing orders” in the same manner as other common law jurisdictions, it does provide for Precautionary Attachment applications which can achieve a similar result.
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Precautionary Attachments (“PA(s)”) are available as an interim remedy before the UAE onshore Courts. Their purpose is to prevent defendants from dissipating assets. PAs can be heard and determined on an ex-parte basis. Once ordered, the defendant will then need to be given notice of the order. As PAs are interim in nature, UAE procedural law requires a substantive case to be filed within eight days, failing which the PAs will be forfeited.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Applicants may also apply for a travel ban against the respondent, in parallel to their application for a PA.
3. Briefly what is the relevant legal test?
Applications for PAs are governed by the Civil Procedures Law No. 42 of 2022, (the “CPC”). In essence, Article 247 of the CPC provides that a PA may be sought if the applicant believes that the debtor’s assets may be lost. This includes circumstances in which the debtor does not have a permanent residence in the UAE, is considered a flight risk or likely to remove or conceal assets. As a matter of practice, the applicant should also demonstrate that it has a strong case on the merits of its substantive claim in order to justify the attachment over the debtor’s assets, pending the determination of the substantive case.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
Pursuant to the CPC, an application for a PA may either be submitted to the Court of Merits directly (in circumstances where proceedings are already underway) or to the Judge of the Urgent Matters Court. The PA application should be reasoned and accompanied by supporting evidence. The applicant may be ordered to provide information about the relevant property or assets which are or may be the subject of the PA, including their location. A Court fee is also payable. The application is heard on an ex-parte basis, usually within 48 hours, unless the Court directs otherwise. If the PA is granted, the applicant must, within eight days of any such decision, provide evidence that it has filed its related substantive case.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
PAs are awarded at the Judge’s discretion. The Court can, at its discretion, require the applicant to provide a bank guarantee, a letter of indemnity or other security before it grants the order.
6. Can it be sought against third parties?
Yes, PAs may be placed over receivables owed to the debtor which are under the control of or owed to the debtor by third parties. This would need to be specifically requested as part of the application.
7. What assets are covered by a freezing (or equivalent) order?
Assets in the defendant’s name and which the defendant has the power to dispose of or deal with solely. This would include bank accounts in the debtor’s name, vehicles, stocks and any such assets. The scope of the assets will depend on the disclosures made by the various entities to whom the Court would address attachment orders.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes, a PA may be made in support of foreign proceedings, provided evidence of these proceedings covering a substantive claim is submitted to the Court within eight days of the Court granting the PA order. In all cases, this does not prevent the debtor from appealing any such decision, once issued.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes, the same principles as above apply.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
A PA application may be submitted prior to the filing of substantive proceedings or during the course of substantive proceedings. Once a judgment is obtained, a creditor may also apply to the Court of Enforcement for execution attachments. These types of attachments, however, are not subject to the same timelines as PAs and are not interim in nature.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
There are no exceptions to the general prohibition on the respondent’s use of assets subject to a PA. However, pursuant to Article 242 of the CPC, there are certain assets over which a PA may not be placed. These include the following, subject to certain conditions and exceptions: public funds of the State or any Emirate, the debtor’s residential property, clothing, belongings, food and fuel needed by the debtor and his family for a period of six months, the land or equipment owned and needed by farmers/fisherman to earn a living and support their dependents, certain funds gifted or inherited intended to provide a salary/income, books, tools and equipment needed by the debtor to practice his profession or craft, wages and salaries with the employer, and funds of foreign embassies and diplomatic bodies enjoying diplomatic immunity under the condition of reciprocity.
12. What happens after a freezing (or equivalent) order is granted?
Once a PA is granted, the Court will liaise with the various governmental bodies to direct its attachment (for instance, by sending order letters to the UAE Central Bank in respect of the debtor’s bank accounts). The applicant must, within eight days of a positive order, submit evidence that the substantive case has been filed, failing which the PA will be lifted. In the event a positive substantive judgment is subsequently obtained, the judgment creditor must file enforcement proceedings within 30 days of the judgment becoming final, failing which any PA placed over the debtor’s assets will be considered void.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant will bear the Court costs of a PA application. If, ultimately, the applicant is successful on its substantive claim, the Court costs of the application may be ordered as recoverable by the Court and payable by the debtor. Costs incurred on legal representation are not recoverable.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
There are no protections in place for third parties to such orders. If, however, a third party has security over an asset belonging to the debtor, the security will take priority over unsecured debts in the usual way and, as such, not be subject to the PA.
15. What are the consequences of breach of a freezing (or equivalent) order?
It would be difficult for a debtor whose assets are the subject of a PA to breach any such attachment as these will effectively be “frozen”, preventing the debtor from disposing and/or otherwise acting with these assets. If an individual intentionally interferes with the legal process involving a seized property, such as by transferring, hiding or changing it, they could face up to two years in prison and/or a fine of up to AED 100,000. This rule applies even if the person is the owner or recipient of the property.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
A third party to a PA does not owe a duty of care to the applicant but rather to the Court. If a third party is requested to make disclosure of assets and/or debts owed to the debtor subject of the PA, it is under an obligation to the Court to do so, with full transparency and utmost accuracy; this extends to compliance with any Court order to place a hold over any such sums, up to the quantum directed by the Court until further Court directions are issued.
17. Can a freezing (or equivalent) order be enforced abroad?
We are not aware of PAs being enforced outside of the UAE without the need for any parallel proceedings in order to achieve a similar effect in the foreign jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In principle, freezing orders from overseas jurisdictions may be enforced in the UAE by the onshore Courts, subject to the rules of recognition and enforcement in the UAE and the requirement of cross-jurisdiction reciprocity. These require the applicant to satisfy the Court, amongst other things, that the overseas judgment is final and does not conflict a judgment or order already made in the UAE or with UAE morals or public order.
Contacts
Rebecca Copley Head of Litigation and Dispute Management – Middle East Head of Corporate Crime and Financial Services Disputes and Investigations Middle East Eversheds Sutherland Dubai, United Arab Emirates rebeccacopley@eversheds-sutherland.com www.eversheds-sutherland.com Shalagh Massingham Partner Eversheds Sutherland Dubai, United Arab Emirates shalaghmassingham@eversheds-sutherland.com www.eversheds-sutherland.com Shibani Kapur Senior Associate Eversheds Sutherland Dubai, United Arab Emirates shibanikapur2@eversheds-sutherland.com www.eversheds-sutherland.com
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